As trade war batters Chinese demand for soybeans, US farmers turn back to grains

Since the mid-2000s, North Dakota farmer Paul Thomas has planted more of his land with soybeans as China’s demand for the oilseed grew. The shift culminated this year when he planted 1,600 of his 5,000 acres with soybeans, the most ever.

But Thomas and many farmers like him plan to return to the old US farm belt staples in 2019: corn and wheat. The change will reverse a trend that saw US farmers plant more acreage this year with soybeans than corn for the first time in 35 years.

The expected shift to other grains comes as farmers struggle to sell the soybean crop because of the United States’ trade war with China. The world’s most populous country typically buys 60 per cent of US soybean exports but has bought almost none for months due to the dispute, pushing prices to a decade low.

Thomas plans to plant more wheat next year, hoping he can earn more by decreasing his reliance on the crop dependent on Chinese demand.

Soybean prices are “kicking our butts”, he said.

Without China, Thomas said local cash prices near his farm are US$7.10 per bushel of soybeans, below the US$8.50 necessary to cover costs.

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The trade war has hit American farmers at a vulnerable time as they are harvesting their largest ever crop of soybeans.

But Beijing slapped an import tax on US soybeans in July in retaliation for US President Donald Trump’s taxes on Chinese imports into the United States.

The US Department of Agriculture, in the agency’s first estimate for next year’s planting to include the impact of the tariffs, on Friday estimated 2019 corn plantings to rise by about 3 million acres to 92 million. Wheat acres would rise to 51 million acres, up from 47.8 million this year, while soybean acres would fall to 82.5 million acres.

Acreage of soybeans, planted before retaliatory tariffs were imposed, rose to 89.1 million this year, up about 15 million acres from a decade ago.

Corn acres are up by less than 5 million acres since 2008 to 89.1 million acres while wheat acres of 47.8 million this year were near the lowest in a century.

Aron Carlson, president of the Illinois Corn Growers Association, devoted nearly half of his 3,600 acres to soybeans this year but plans to cut back.

He said he might increase corn planting by up to 20 per cent at his farm in northern Illinois. The state is the biggest US soy producer.

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Soybeans yield fewer bushels per acre than corn but also require less fertiliser, making them generally cheaper to grow. A switch to corn could raise costs for farmers but benefit some companies including fertiliser sellers like The Andersons, whose chief executive Pat Bowe said he expected a switch to corn would be good for fertiliser use.

Bayer, too, expects to benefit from a switch to corn.

“Corn has a longer growing period, more issues with weeds and fungi … This is a benefit for our overall business,” Liam Condon, president of the company’s Crop Science division, said.

While soybean prices tumbled to a decade-low on September 18, corn is not frequently exported to China and slumped to merely a 22-month low. Wheat prices are up 19 per cent this year as reserves in many exporting countries have fallen to their lowest since 2007-08.

Corn demand has benefited from long-term growth in the livestock industry and grain-based ethanol. Drought in Brazil and Argentina also made corn importers more reliant on the United States.

A record 3.2 billion bushels of US corn were consumed from June to September, the USDA said on September 28.

Illinois farmer Eric Honselman said his family farm planted about equal amounts of corn and soybeans on their 5,600 acres. But corn acres next year were likely to increase by up to 5 per cent.

“Next year, we will be longer corn than soybeans,” he said. “Every time the market tells me to grow corn, I will do it.”